>> john, thank you for joining us. john taylor and andy sseywer. >>ly be on "squawk on the street" for a couple of days so all of this sleep will not be needed. >> thank you for joining us. now it is time for "squawk on the street." good morning and welcome to "squawk on the street." i'm david faber with jim cramer live from the new york stock exchange and our partner carl quintanilla is off. retail sales growth came in slightly lower than forecast came in, and now over to japan, and because the nikkei is on the move. and a thought that there is

considering a corporate tax cut to help that line. and uk housing data and german sentiment. as for the road map, it starts with the jcpenney ceo bill ackman resigns. and yum's sales in china is an important market falling more than expected in july. and pc problems with microsoft downgraded by stifl nicolas, and is the stock's bull run coming on an end, and forget the planes and trains and automobiles, because e lon musk is out with the hyperloop. put it out on the interneshgts a -- internet, and it is cool. >> it is cool. and wouldn't you love to be ahead of the chinese on something. >> yes, let's go out there and reach for something. >> and musk is not settling on

the chinese got ahead of us, and he is leapfrog, and we should call him leapfrog musk. >> or pylon man. and we want the start off with the news that we want the cover since it was announced hedge fund manager bill ackman has been pushing for changes at the top of jcpenney has resigned from the store. he runs pershing, and formally named the board executive ronald tysoe to the board. and he is going to give up to mike ullman and both of them have been said that they should both be replaced posthaste as it were. this is a fascinating story, and not because we are focusing on pen nee and -- penney and the

trouble, and for part of ackman pushing for ron johnson and the board not et going the way when they a wanted a ceo chosen bucks the fascinating change of the founder and the ceo of the board resigning. >> did he impart this to the shareholders and the board? no. one reason that howard schultz has made this point is that throughout the time line, there is no recognition that 116,000 people work in jcpenny's, and the sales have dropped, because of no stability on the top. i have been on the fractured boards and been on a fractured board and i can tell you what happens the product and the company suffers. it is time for this change to be made. david, does it make it easier ultimately after he does not have insider information to blow out of the position? >> yes. it makes it easier, and one has no idea if he will, and the

position is not a positive one for him at this point, but perhaps he will choose to quiet down and not say much, and let the board do its work and for its part, the advisers to the board are saying, listen, right now the board is focused on stabilizing the company, and the next reported quarter that you get, that is the last johnson quarter and the last one they will say, okay, that is the old regime and you have back to school coming or the midst of it and the current quarter is the first one where they will lay the groundwork for saying we are making progress and getting back to the old jcp and ullman is the man to do that and we start eed search for a potential replacement, but it is the same way as p&g, and a.j. laughly is in but we will find a new guy for the long haul. >> housewares business which is keystone to johnson's plan and it is jump ball. nobody knows where it is, and they are bringing back the private label, but one thing i

have learned about retail is that when the customer leaves because the customer doesn't like it, it does not change -- >> they don't come back. >> you go the macy's, and you say, hey, macy's has coupons and lundgren with good stuff and the vf corp and the name and the north face and the best pvh and why do i have to go to that place when i want to go ak skroz the street at the mall? those people are hard to woo ba back. it is different if kohl's and macy's and target were screwing up, a la best buy, and they make a comeback, because there is nobody else. the other companies have gotten stronger and not weaker. i am calling it the mcguffin is like hitchcock, because it is lack of leadership. >> and we don't have a leadership problem, and we have ended the struggle here with asking mr. ackman to resign, and he did. so they have a business problem,

and you are getting to that. david berman noted hedge fund retail manager followed that he is negative and many others, and i hear it from you of the fact of alienating the customer base and then moving to the position to get them back, can you pull it off? >> i have never seen it. they have been saying since they had the minus 30 comp store, and he was 29% and not 30% turned, and when you have that comp store decline and they have way too many employees and it means the wrong merchandise and you can't recover, and i have never seen a company recover and this the merry-go-round and those who have mrg, and they came up with a comep number like this, and it was the end. and theyed a very good numbers and not on the scale of skrshgs c pennies b there are number s that you can come from, and we will talk about yum, and others that you can't.

>> and we remember remarking down 30%, that is is not something that you can potentially come back from. >> that is like a quarantine, don't shop here. >> and tackman -- and we will talk about the ackman point, and it seems that the actions are almost part of a larger let me see what i can do -- >> i know what he needs for the herbalife short. he needs to join the board. join the board. >> yes, with carl icahn. >> bingo! >> that by the way, televised live would be fun. let's get to yum, and jim mentioned it. the stock is falling in the premarket, and the maker to pare parent? what are they? the parent of taco bell, and kfc and pizza hut. they fell 13% which is steeper than expect and yum which operating more than half of the profit from china has been trying to overcome a food scare

there, and you have been positive on the management of david novak, but this is somewhat unexpected. >> yes, i own it with the charitable trust, but what people need to know is that who often controls is the last guy who talks. merrill lynch came out to tell you that this problem is done, and that set the expectation, and drove the stock up to $74 and my charitable trust is buying it and why? because the expectations were behind and novaks ha never said that this is going to be solved in the second quarter. and he never said it would be solved in the third quarter, but he said a year, and the street got ahead of novak, but he is for real. >> and novak is for real. what do you do? >> look, i didn't like the numbers and a setback. i was looking for china and the same-store sales to fall at a fraction and, geez, i was -- they fell 13% and i thought it might fall half of that and kfc,

itself, we are talking about 10% drop in july and the comp, but it was the pizza hut that shocked me. i thought that pizza hut should have been much better. >> and pizza hut is not associated with the bird flu problem. >> that is what bothered me, hold it, no, wait a second, it is not the mozzarella flu. >> something more similar. >> not the tomato sauce flu. >> anything wrong here? >> no, things got ahead and the comp numbers, the projections were too high. i think that the projections at the last minute, the consensus got too high, and kind of an apple situation where the consensus kept growing and growing and growing and you could not deliver, but i believe it is temporary and i want to go back to what novak promised. a q by q4, the drama would end to a close and we are not in q4 yet. >> no, we are not. over the microsoft, the shares

up 22% if you have not noticed, but now the firm is downgrading it saying that the heightened pr pressures and the marketing expenses could be headwinds to microsoft's coming years and not just coming quarters. wet have all remarked on the enormous runup on the price of the stock in early april and i have mentioned many, many times the presence of the hedge fund value act and who is in the process of trying to secure perhaps a board seat, mchubbin, and could be an important voice to argue for changes in the company. you had a restructuring that took place, but no cost savings associated with it. >> the one microsoft and the one ford. it is like penney, david, because you is a giant infrastructure and the product of sales, and we are talk asht windows, it is big and done. so it is not a blackberry situation, because they have a

lot of cash. >> and they have a lot of other businesses and the enterprise businesses and people talk about that and the plumbing business for so much of what is going on in the technology world that microsoft is a part of and has much more predictable cash flow characteristics. >> but this is a p.c. company, and i like the entertainment division, and windows with gigantic margins and they can raise the dividend of the stock again getting ahead of itself. i don't want to write off microsoft, but you have to have more catalyst, and the catalyst is the value that you are talking about. >> yes, but how much of it is on the in the stock already? it is a huge position for any fund so to speak, but the percent of microsoft's outstanding market cap is nothing, although he can potentially do this, because there are a lot of shareholders who are looking for an opportunity to have their voice heard. >> at the same time, apple is a

tablet and cell phone company, and microsoft wishes you could have a tablet and cell phone business and samsung led the way for a lot of companies, didn't it? >> yes, but when you come back to valuations on the name, and looking at the report it is trading at 12 times the calendar year -- >> well, procter at 19. >> yes. 20 times. >> and general mills 18, and it is not like they woke up and figured to have a better cherrios that works better on the cell phone. >> this is not the growth company of the 19 l1980s or the '90s, but 12 times? how do you argue there? a lot of downside. >> this is a market that loves growth. unless microsoft got into burrito business and i'm talking about food with integrity the

market wants open table to merge with facebook and then you ccan be on the cell phone and get a better table. we don't want inwith e dos, but table reservations. >> i thought i could use open table already to get that reservation. >> no, that is up. don't you yelp? >> no. >> get yelping. and they had a good quarter. >> and groupon, had a very good quarter. >> not too early to buy it. >> and retail me not means sale, and just the symbol alone. microsoft needs a new symbol. >> the big m. >> and mr. softie, and remember they had it for so long. >> and macy's, and a trade, may them some money or cash and player to be named later. >> these are yesteryear companies and palepaleosaic tec

>> and now there is a revolution to unload transit in a new way. he calls it the loop system. can you really go from new york to los angeles in half an hour? >> and the golfer coming off of the biggest win of his career, and we will talk to the pga championship winner jason duffner, and looking at the futures again, we are looking for and up opening today. more "squawk on the street" coming right here from post 9 at the nyse. [ male announcer ] here at optionsxpress, our clients really seem to appreciate our powerful, easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board --

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go long. elon musk unveiling a new plan to cut the travel time from san francisco to los angeles to 30 minutes and the price would be less than an airline ticket and he hopes that someone will develop the concept, because he doesn't have the time and adding that he is too busy running electric car tesla, and rocket manufacturer space x, and i have no idea if we will see it or if it is possible top ha, p happe it is nice to see somebody think

big. >> i remember that in this country, the think birk and the late steve jobs was working on the car that ran on water, okay, because he thought, what are the big problems on earth, and this is the kind of thing that i would expect from the chinese and don't expect it from the united states. >> which is a terrible thing to say in a way, because 25 years ago nobody would have said that. we expect it to see it from the chinese and not us. >> because the chinese are trying to the figure out how to cut pollution, and took our jobs and now they want the make sure that they are not poisoning themselves. they have 1 million people who are going to die of respiratory ill innocence china. if you called a banker right now and said, i need to do a hyperloop, they would throw money at him. >> he could raise money for this? >> yes. $8 to $10 billion? >> he could raise it. you see 800 miles an hour, and you need to build a lot of pylons to do this and no electricity runs the -- and some of of it are based on the theories of tesla, the original

tes tesla. >> the edison opponent, and there's not a plaque or anything, but mo green. >> and run it down the middle of highways perhaps? >> yes. >> and something if we were to see the light of date would be transformational. >> and solar city has been a big win and so overshadowed by the incredible win that is tesla, people want to back this man. i think that the man by the way is loved. we all, and there is if you were in our position, you get ten e-mails a day saying why tesla should be a $4 stock. okay. memo the all of the people who think it is a $4 stock, go drive a tesla. you will have to pry me out of one the next time. he sent one for us to do a test drive. david, i don't regard myself as a great driver, but when i was behind the wheel, i have to tell you -- >> you were a great driver. >> yes. >> well, you are not known as a great driver, but a very good driver. >> yes.

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♪ don't be so quick to ♪ walk away well, we have 7:30 before the opening bell and that is more time than usual, so let's do a couple of stocks on the mad dash and start with eli lilly. >> well, david we all have

become quite used to biotech developing fantastic anti-cancer drugs and that is what we have seen and why celgene has been so fantastic and gilead has great franchises with hep c, and now lilly comes out with late stage four cancer and this stock comes alive, because well, lilly had a good quarter, but they have been making the numbers with the cost control and the alzheimer's drug didn't work, but when all pharma has a good number and drug and yield, you will get this. now, do you sell lilly? the pattern has been that lilly announces something big, and then it drifts back, because the needle to move big pharma is so, so impossible. so this is a cheap stock and if it went to $54, i'm buying. >> and now are we going into a new aer ra of innovation rather

than patent protection of introducing a new it ration of a patented drug? >> no, they are cutting, cutt g cutting, cutting, and outsourcing the tests. j&j, and gor ski said we are spending billions to test the drugs and let's hand it off to the guys who can do a test for much more quick ly and easily ad inexpensive. so i am saying that big pharma has been dormant, but they have a lot of stuff working, but a lot of it is harvesting the last stage stuff and not do the basic. >> we talk about how the big market techs are going to have gilead. let's move on the bp. >> everybody has to recognize that dudley who is the ceo, and people feel that he was snookered by the u.s. government and micking a big deal with the justice department, and while the ink is the drying, the epa

sue sues him. he has full page ads saying, what do we have to do to please louisiana? there is a lot of feeling behind this by tort, and by tort lawyers on the defense side that this company is going to be asbestos, out of business, and they have to raise the reserves, but maybe a growing feeling that they were had by the court. >> and saying yes, yes, yes, to everything in the hoping that in this point they would be in the clear. >> they bougtd no goodwill that i can see, and they have tremendous assets and good dividend and better managed than they used to be, and they sold properties that did not hurt the production a la the big guys, but david, it is now a binary stock on a lawsuit. the lawsuit goes well, and goes badly -- that is a tough thing for anybody. it is a great situation for options people out there making an options bet, but this was a great company. and now it is in the hands of

the court. >> well, they had a pretty big screw up, and don't forget that. >> well, it is -- it was real bad. >> yeah, yeah. >> valdez times ten. >> all right. now yesterday we saw the blue chips extend the losses from last week and so far, it looks like a positive start to the opening of trading today on this tuesday. stay with us for the opening bell right after this. [ male announcer ] i've seen incredible things.

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it's not rocket science. it's just common sense. from td ameritrade. you are watching cnbc's "squawk on the street" live from the financial capital of the world where the opening bell is set to ring in 45 seconds. give or take a few. a lot of very cute kids on the floor today. >> yes, and it is kind of like a "today" show atmosphere. >> what are we watching? what should we pay particular attention to if anything this morning? >> well, i think that once again, we are stuck in the world, and there is a key downgrade and it is small, but it is key. credit suisse goes to the whole on the third, and one of the products has been regional banks who have been the strongest s

sector other than defense stocks and watch that group. that is the underpinning of what kelly evans said yesterday which is the reemergence of the financials as being the biggest in the country, and if they can get it down, that is a mayer jo pillar to the rally. >> they are are not near the profitability as '06 and '07. there is big bell. and we have teletlt stock mining. and over at the nasdaq capital bank shares. >> you need to see them go. >> and ten years of publicly traded company. >> and texas has always posted the best place to bank in the country in texas, and never had the real huge run-up in the real estate. >> after they lost every single bank in the '80s, because i was a bank iing report in 1987 and watched them go undo, every single one. >> and yes -- >> and didn't ron pearlman come in.

>> they had brilliant guys come in. >> that worked. >> yes, and the jerry ford and the other jerry ford, and i am looking for the retail to stabilize and we have reports coming up of the macro retail sales not that bad and then watch the china plays. caterpillar breaking out and i keep chi of the chanos interview that you did in delivering alpha, and he said that it is the short of the market, and a lot is because people believe that china is coming back and going to start ordering equipment again, and this is not an easy proposition to believe, however, the momentum is with the cats and the cummings now. >> when you mentioned china, of course, i look at yum, but it is not that bad now. i am not sure a full open, because it is only down 3%, jim. >> well, merrill lynch -- and down the 13% same store sales out of china you would have thought -- >> well, the last-minute expectation gain you would not be down. and jcpenney trading up. and apple, you know apple was up

13% in the day. in the old days if it was up 13%, we would have devoted the show to it. now 13 up, okay. nobody cares. >> that is a good thing. >> of the expectations. and analysts say i took the price target down the 440 and the answer is to raise your target. david, you taught me this raising and the lower the pricing is a sham that the analysts put on. >> it is a joke, and they are under pressure to do it, but sometimes from the body of the analyst report, as you know, you will find nuggets that are of great value, from some of the analysts in some of the reports some of the time. >> there are guys do the numbers and the model. >> and on the conference call, give me the right numbers to plug in. that is what i want.

>> and the gross margin is this, this, this. >> and what about the debt, and it is all adjusted to get a number. >> the flip in whole foods was important to point out, because people in the conference call are saying more in store. are you worried about the 2,000-square foot, and the management is saying, guys a sek you lar waiver, and they stopped it on the after and they made o money for you and the other analysts who are the big think analysts and you ccan test it t tesla, they made the number one car, and other guys saying set valued at $500,000 a car, and the granular guys got it wrong. that is what you have to focus on, the granular guys are mis g missing the big picture in apple which is maybe, maybe there is a pulse. people like larry ellison question that. >> we have to talk about what ellison said. >> yes. >> and i want to look at one of my favorite symbols lvb, the steinway musical, and you know

that is ludwigbeethoven. yesterday, we learned about a deal that was entered into with a firm that has been identified as paulson and company which is a hedge fund that does not typically per sue private equity deals, because coal vert h-- co had the right to buy, but passed. i don't know if he is a music aficionado, and if there are musicians in the hallways of paulson and company, but interesting choice. >> is that like guying a "washington post" a business? >> well, everything is a business and i have the yamaha and i would pay up.

>> well, the stock is down? because perhaps hopes that he would come back and talking about a $500 million company. >> it was shocking to people, and carl quintanilla did an amazing interview with him at the alpha conference, and paulson is talk about the ginnette and when they buy things. >> yes. >> and ub likes ra s ravion and steinway and roll over beethoven. >> yes, indeed. "roll over beethoven." and now over to a guy who can sing a tune or two himself, bob pisani on the floor. >> well, jimmy, you are seeing what is moving the markets today, coal stocks are up again and the fourth or the fifth day in a row. we have seen the material names move up and steel stocks, and emergency stocks are moving up, and all of it on the better

china news that we have had over the last several days, and the coal group is up almost 10%, and the steel stocks up 10% last ed the last five or six trading sessions. the global markets are all up and that is on hopes of improving economic data and not just in china, but did you see what is going on in europe. the european stock markets are near 2 1/2-month highs this morning. we saw better german and confidence numbers and the eurozone production levels, and not fantastic, but good. july retail sales in julie, they were fair and 0.5% on the core, and that is better than expected and everybody believes that the fed is likely to taper in september, and those who below that the fed will wait until september, they were the majority and now that, because i sur i haveyed as many as i could then the bond market moved down and the yield market up, and

there was a last gasp as many believed that the taper continues into december. moving up, the material stocks like lilly. isn't this it, the drugs that change the chemical makeup to lead to the cure to cancer. this kind of thing is making the golden age of biology overall now, and new drugs tapered to attract specific mutations, and that is the young prand. and one thing that is so important is the numbers coming down, and deutsche bank bringing the numbers down, and this problem is not confined to yum brands, and mcdonalds does not break out the same-store sales in china, but they said in july china sales were negative overall, so it is not a problem related to the yum brands. guys, back to you. >> it is great to point out two things, the coal, and the bhp

and they are trying to restart the business and it has been on the ropes and they used that term. coal is a hurting industry and i won't for a minute say it is not terminal some day, but the other countries are building plants. on the china situation, starbucks said they had incredibly strong sales in chinaings so maybe it is what you eat and drink there. >> they are not going to pizza hut. >> hey, i was at pizza hut and not that important of a mover, but it is not going good and kfc is the thing there. you know the pecking order, general sanders and general gao is back on top. >> okay. i want to do a faber report, and that is the name of the report, the theme of the market that we have seen over some time, and in part certainly puts a focus on t the media companies that have benefitted from the low-rate environment, and used it to

their benefit by issuing an enormous amount of debt to buyback a lot of stock. of course, they generate a lot of cash and they do that and the ratio has not come up that much. and i want to go the viacom, because we have learned of a huge debt offering yesterday. the securities and the various points of the yield curve $500 million of 2.5%, and so you can have the money at 2.5%, an 10-year money at 4.25, and 30-year money 5.85%. that is up a little bit. with kelly off, and she has talked so much about the yield curve and the 10-year moving out a little bit, and we will talk to her, but a lot of it is going to buy back the stocks, and

increase the buyback significantly and quietly increased the leverage ratio from 2.75 to 3 times which is fine. that is the energy behind the runs and that stock is up 80%. >> i am glad you brought it up, but while you are at the beach, aim looking at the hand delivered charts at my life, because i have a pathetic life. >> is there a particular man who does that? >> oswaldo comes between 7:00 and 10:00. he used to put it in the mailbox but now to the door. it is a s&p product. and i look at the viacom chart, and it is k-2 and i can't believe this thing. what happened, what happened? bingo. look at at that. >> look at it as we end here, looking at the stocks -- >> you need a sherpa to climb that. >> so many have benefit edand l of it is fueled by consistent buybacks and not so much as disney, but still important of stocks in part because they are

going out into the capital markets and borrowing money the do that. >> we should go to rick santelli of the chicago bond market. >> well, the yields are up, and 2.62, and we have ticked off 270 up eight basis points and selling off with the rates rising before the retail sales arguably as expected. you could take it at that, and if you look at the two-day chart it will paint the picture, but here's the interesting point. current read of 269 and 270, and should we have chosed this area, because it is the third highest yield chart, and going back to the 20 ovt june and that is the highest deal in two years. keep the date, because it encapsulates the marketplace with the sell-off. if you look at the pooboon, it moving up as well. and they are at 179 and we are

at 270, and taking away 100 basis points on the boon, you can see at 79 basis points the tame jgb, and what about the happiness in europe, and not about the economic data, but as the data is getting better, the euro is rolling over and the chart of the dollar/yen is doing better with the yen rolling over. if you are an export economy, the weaker experience is what you would prefer. david, what is your preference this morning? >> i'm in favor of a strong dollar right her. >> king dollar. >> that guy could be treasury secretary right there. >> i'm practicing, bill. oh, no, i got an endorsement. >> we don't need another fwi

from wall street. >> i didn't realize that i was from wall street. >> we need another guy from queens and forest hills. >> that can't happen. not two in a row. >> there is kelly evans and nice to have you here, and i think fixed income when i see you, but i don't know if you are going there. >> you think that when you see her? >> me, too. >> holy, cow, fixed income. >> and corporate income and japanese bonds, and can i give you this nugget, and the little point that you were making david about viacom, and the buybacks and thank you, david reynolds over at rosenblatt for this head's up, we hit the 2 mill yyo millionth buyback shares of the average price of a s&p share is $70 and in the 50s in last couple of cyclical highs.

so all sorts of ramification s that we are talking about elsewhere. i wanted to mention, because a lot of people are asking about what is happening in japan overnight. the nikkei is up. % or so -- is up 2% or so, but the question is if japan is ready to break out of the malaise. and the gdp grew 2.6% estimated and hit 3%. and now there is also abe who is considered to be trying to delay or offset the consumption tax that should hit next year. japan's sales tax is about to increase from 5% to 8% in april and then 8% to 10% in october. they are now talk about perhaps talking the corporate tax, and if you think it is high in the u.s., japan's is 38%, and gra granted a lot of the companies get out of paying that already.

anyway, that is helping the equities overnight. look at what is -- to bring it back to fixed income. look at the japanese debt, it passed the quad zillion figure. >> and it is like google. >> well, i will say that the market is responding poz sitive ne news, and it is not depressing debt, but growth that they are concerned about and they have to show it here. >> fb you louse report. >> and we are focusing on the japanese market so to speak is not a big focus for you nor the overall economy. >> because i think that yesterday japan was down and even said dun by own by 30 and everything is overlooked and japan is exciting story to watch. >> and a piece of the macro piece, and third biggest piece. >> and lt of the companies are doing better in japan. >> yes. >> and that is what i am hearing

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this is the pursuit of perfection. apple shares are up today, but still down more than 10% this year. oracle ceo and co-founder larry ellison speaking out about steve jobs this morning in an interview on cbs. >> he was brilliant and our edison and our pi kcasso and

incredible inventor. >> what happens to apple without steve? >> well, we know. >> what? >> we conducted the experiment and it has been done. we saw apple with steve jobs. we saw apple without steve jobs. we saw apple with steve jobs. now, we are going to see apple without steve jobs. >> so you are shorting apple? >> i'm not shorting apple, because i like tim cook, but steve is irreplaceable. >> but apple is going down without steve jobs. that is what you said. >> okay, i will say it publicly, he is irreplaceable, and they won't be nearly so successful, because he is gone. >> wow. >> i mean, that is larry ellison saying something that many have said and in fact, you have alluded to that and we all have and you all wonder about that, and tim cook, obviously, irreplaceable, but hearing that from starkly from larry ellison who is one of the entrepreneurs

of silicon valley. >> would tim cook say it differently if he said he is irreplaceable, but stay tuned, because ellison is not talking about the dna, but it is a one-person company. a lot of people thought that ellison and oracle was a one-person company, and looks like a bench. i don't like the oracle stock at all and i will say thashg and i don't think that ellison is irreplaceable. it is slamming apple by the way above the 200-day moving average. >> called him the picasso and irreplaceable, and when you place a company around innovation and have a picasso and you will innovate and now you won't without them. >> and it is not like barnett newman at the helm of rothko, but nothing is as good without jobs. the stock went to well over 700 when jobs died, but many thought it was in the pipeline, but when

i interviewed the man who wrote the jobs' bio, he said that he did not leave a lot, and i can understand ellison saying this is what you get. >> i want to get to ellison, because he had a few choice for google and oracle's patent battle over java and how sit is used in the android operating system. >> i think that what they did was absolutely -- >> you blame larry page. >> 100% larry page. >> if what they did is evil it makes larry page evil. >> no it makes what he did is evil, and that is different, and i know that the slogan is not to be eel, but he slippvil, but he >> so he is a good guy, but he slipped up one time. >> this bothers me. i don't know how he feels that he can copy people's stuff, because it really bothers me. >> he has always been a contentious man, and always outspoken with that much money

and the reputation, and he is coming after larry page. >> and making pacts with them, an sales force.com, and they had been going after it, and even though they knew each ore this, and -- each other, and now they are best friends. ellison and i don't understand it frankly, but he is a volatile guy. i can't get into his mind, but he is a volatile guy. >> i wish i had done that interview, that is all i will say. nice job, charlie. we have "6 in 60" coming up next.

all right. we have time for "6 in six ti" and let's get right to it and start off with xerox. >> well, they go from neutral to buy and this company is starting to get its act together. >> and rockwell collins did a deal yesterday. >> yes, and that is what we want. the market is funky with no leadership, but this is up. >> dick's sporting goods. >> well, goldman says that the numbers are below consensus, and this is a stock. there is a spillover from nike and under armour. >> and athena health? >> it is controversial and they say it is too expensive and i could say it is the case. >> and what about dran prices? >> well, the stock is staying

highing becau inbecause of the >> and lulu? >> well, this could be breakout here and if the market turns around, watch out, because it is a rocket ship. >> and it is shark week, and what do you think? >> well, we have a group so down and out, and the chartists are saying it is time, and time. and we have abnet who had a tough quarter and yet the stock is up big. and another great performing stock is gtos, gas to liquids, all right. and they make a lot of equipment to use natural gas to be used as a surface fuel. and another one white wave and i'm a believer in the organic food and they are behind the organic dairy. >> great line. >> for kids who are vegetarian,

everybody knows their products. >> that was great. thank you for being with me, just the two of us. >> fun. >> and we have a lot of us coming up coming up in the show, and we will talk to golfer, and pga n winner jason dufner. keep it right here. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together. (announcer) at scottrade, our cexactly how they want.t with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade.

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welcome back to "squawk on the street," june business inventories unchanged and less than the 0.2 expected and if you look at may, originally released up 0.1, and now stands down 0.1, and i understand that the june nu numbers on inventories are important to help tweet, modify or revise gdp for the second quarter, but with the huge drop in trade deficit, it should be a much bigger issue in that regard when we see the revision in 2 1/2 weeks. simon hobbs, back to you. >> okay. we should of course remember that we had retail sales today as well sh, rick. meanwhile, negative buyers to the market, and coming off of course their last two months, and we were down 1 or 1.5% depending upon the headline you are using. and the next guest is feeling optimistic about the market in t

the next few months and joining us exclusively is the head of the u.s. equities and bank of america and merrill lynch, and she has a another 3% gain from here. >> another 3%, yes. it does not sound incredible, but the surprising fact is that we are one of the highest estimates on the street. >> why do you believe that we will keep gaining? >> what drives is here is the thing the fed talking about tapering is good news for equities and the e kconomy, becauset means that we no longer need a life support to keep it going. what is more interesting than the upside for equities is what i see is an interesting rotation within the equity market. so far we have seen the investors start to buy the equities, but they have gone into yield, and bond proxies and the next phase of the market is moving to more cyclical gdp sensitive stocks and sectors. >> provided presumably, you have the growth, and there the jury is out, because it could be

exciting that over the next couple of months you could see the growth coming through in the conmy and then 3, 3.5% for the next three years or possibly not in which case you would get the gap. can the equity market be supported at these levels with a fed that is tapering with where we are now this is. >> i think that the tapering will continue until the economy is kind of in the all clear zone. in that environment maybe you will continue to see the defensives work -- >> that is not what i am asking you, and forgive me if i'm not explaining myself now. but if the gap is, the fed says we will tape er r in september, can it sustain with the place that the markets are because people are talking about a correction and there are voices saying that. >> well, there is not as much selling pressures on the equities today, because it is not like the investors are all in, and if you look at the flows, the flows have started to trickle in the equity market.

so i would argue that there is a big underweight in equities at this point, an investors have been generally too resonant to buy at this level and waiting for the pullback. so my sense is that it is not like everybody is in the market, and they will sell the equities if we see the growth disappoint, but my point is that nobody is in it yet, and we will continue to see the buying side and the upside of the market. >> i have a weird question -- >> oh. >> and spurred by the question last hour sh, are the corporate crowding out the retail investor from the market. >> that is a great question. so the corporates have been the big buyers of the equities, and that is really bullish for the, ma, because it means that the equity supply has been reduced, and so from the supply/demand perspective, less equities and arguably lower demand. >> you rigt radio, it is one of the single most important factors behind the market, but if you wanted to see the

rotation to happen or for the sake to see more u.s. investors involved and if you are are looking at the shares because there are fewer and fewer out there and we know that is happening with the s&p 500, why would i buy these things because it is ultimately for expensive and disswajing the average in s investor? >> well, at some point it will matter and the valuation will get to the point where the in s investors no longer prefer equities to bonds or gold or commodities, but we are still at a point where the equities are cheap. it is like the no al teternativ argument. >> but it is not the same thing to say they are cheap and no alternative, is that the same thing? >> well, okay, so there is cheap -- >> because the bond market is artificial lly depressed. so on the historical market is the equity market expensive now? >> we looked at over a dozen valuation measures, 15, and we found that 14 of the 15 measures priced to book, and precash flow

yield, and everything that you can think of, they are sjing that the equity market is either fairly or undervalued. the only measure that we looked at that suggested that the equities are expensive is the schiller p.e. which everybody talks about, but the problem with the shchiller p.e. assumes that the last ten years are going to happen over and over again for perpetuity, and you look at what happened with the worst property leverage and most of the amount has been taken out on the balance sheets and taken out. >> so to look at the draconian theory, what is the forefront of the rotation? >> the next rotation, it is time to move out of the bond proxies to move into the bigger cyclicals and sectors that the investors have shuped, because they are worried about a global recession, and move into some of the more global stocks, and that

could be a great look at the u.s. equities with expose sure to europe. there are lots of places to go inexpensive, but what i don't like is the bond proxies. >> we would love to see more of you down here at post 9. >> thank you. >> and thank you, head of u.s. equities at bank of america and merrill lynch. and also, today, bill ackman is resigning from the jcpenney board and does not plan to sell his shares. andrew sor kin has more, and great to see you out here "squawk on the street." you spoke with bill this morning? >> yes, it is not that he wants to sell the shares, and he may at some point, but currently right now sh, he can't sell the shares. so even though he is off of the board, because he has inside information about the strategy of the company as any other board member would, there is a period of time and perhaps several months or perhaps longer

in which he can legally not share the shares, because potentially he would have numbers that others would not and if they change strategy after christmas when the new numbers come in obviously about how well the strategy worked, and tings this that he would not know at that point, perhaps you could sell his shares and worth note tag he bought the shares and basis is $25/share and right now those are trading in $13 range, so that tin sensitive he sell may not be there either. >> and ackman, and i know you know him well, because we have been watching him for years and it is fascinating to watch, the jcpenney and this fight to be happening on a board he was a part of and herbalife, and also aerolife, and it is a huge position, and what is going on with his approach right now? some think it is erratic and

almost emotion al. >> well, a lot of critiques of how he has approached it. i have been critical of how he approached the jcpenney decision when i spoke with him on the telephone this morning, i said to him, why would you take such a public approach? it creates a lot of potential threats both to the company and also frankly to him, because it is much harder i would imagine for him to make his way on to the boards that historically people have brought him under the tent hoping to keep him quiet, but now if he is under the tent and still not quiet, that is a greater challenge. i'm not sure. sf he lo if he looks at this particular situation and rationalizes to go public puts the company on the right path, and we won't know for some period of time and that is what he believes, and he quoted warren buffett a 1993 letter that says that the board

member should be outspoke even if they don't believe that the board is doing the right thing. i don't know if warren buffett would agree, but that is the state of the play at the moment. >> thank you, andrew, again, for keeping us update and anybody who is watching the back and forth, important and appreciate it. >> important the note that ackman is one of the serls, but given andrew's reporting, it is not the case. >> and it would be machiavellian to suggest that there should be a change of ceo to sell the stake. >> and once he steps off of the board, buts an drew outline d h does not at this point, but more freedom. >> over the josh lipton with the quick market flash back at hq. josh? >> we are watchk orbitz, the online travel agency getting hit hard. the headline park avenue management, the largest shareholder sold some 8 million of the 20 million shares to better diversity the portfolio and saying it is still

optimistic about orbitz, but you can see the stock down 12% right now. and back to you. >> we should mention how strong it rebounced last week. that is a small fraction compared to last week. and coming up pga champion jason dufner will join us big after his big weekend win. and we go to the brand new $6 million facility at the university of oregon with a look at how much cash college football really brings in. that is jane wells, and she will be with us shortly. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work.

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it is one of the most lucrative sports out there and it is not professional sports. college football rakes in money for universities and one of the best examples of that is now the university of oregon. jane wells is there live at the multimillion dollar football complex they are unveiling today. with the mascot, jane, we thought it was you dressed up as the mascot. >> wait. someone else here? well, maybe i see a bird. i am standing out in front of a 40-yard electric track and one of the unique elements here, and here is the thing, nobody loves the ducks more than alum phil knight of nike, nobody. at least when it comes to money,

and here he has funded so many things at the school, but look at this tape, nothing may top the black glass performance that some have named the duck star that knight and his wife have donated to the school. and thumbprints needed to get in, and ventilation systems and italian marbles in the showers, a barbershop. you keep doing the push-ups, dude. and new head coach has windows on three sides to look at the three new practice fields and special hot tub for the coaching staff and array of toiletries, and area 41 which is a high-tech german table, and 500 pound handmade rug from nepal, and that is something to quack about. and 145,000 square feet of it. 96% of the walnut they brought in was rejected, because it was not good enough. be it is good enough to help the dux beat an s.e.c. school and win a bcs championship and good

enough for a player here to bring home the heisman, or more likely, create the most potent school, and oregon is being penalized for a recruiting violation, and it is a tough thing to run a program that is so lucrative when you are dealing with the amateur athletes and does the system need to be changed? we will speak to the athletic director here rob bull mmullinse will talk to the head coach and the star quarterback marcus mariota, guys. back to you. >> that duck looks winded and if you will forgive the analogy, and look at this, you were talking about a multi, multimillion dollar facility and can oregon afford this? this feels to me like the thing in a market. >> they have not had to pay a

dime for this. it was built by the knights and gifted to them, and think are raising more money from boosters to pay for the maintenance cash, so this is not going to ideally cost anything, and generates more money, because the team plays well and maybe a championship and sell more tickets. that duck needs more push-ups. and for those who don't know, the duck does do push-ups when they score a touchdown. >> and david said they don't pay the players? >> well, it is a subject of debate right now. at some point down the road, given the system, do the players need some sort sof compensation or sponsorships beyond a free education? that is the difficult question facing te ing thing the sport w >> and intangible benefits in that sport as well. >> bring them loaded on the helmet as well. >> yes. >> if the duck doesn't win an emmy, no one will. >> exactly.

2013 turning from the university of oregon to professional golf the 2013 pga championship came to an exciting end as jason dufner won the open. congratulations. >> thank you. >> what has it been like in the 48 hours since you won? >> well, it has been great. i got home yesterday for some time, and i was able to share this with some friends and family and now to be in a great city of new york city to do some press. it has been fantastic. >> yeah, jason, we are seeing a slouch there that has already come, already become famous around the world known as duffnerring, and showing you pictures but photographing and sitting in the k-12 classroom, and jason, how sick are you of seeing the pictures? >> well, you know, it is okay. it is amazing with the social media how fast it can get around. that was the number one trending

things on twitter for a couple of daysm. people are sending me stuff, and it is weird to get into the pets and stuff, but it is weird to me. >> they have duffnerring pets? >> yeah, i have had dogs, cats, bunny rabbits, all kinds of stuff that people send to me duffnerring. >> yes, it is a weird world out there, but it should not distract from the fact that you are one of the best hitters in the game which is what people are saying and the win would cap for you what has been a period of time trying repeatedly to get there and take home one of the titles. how exciting for you the have that in your possession and what would you like the do next? >> well, it is neat. my whole professional life since 2000 i have been trying to win a major championship and to see and know and feel all of the hard work that i put in to get to this point, and to accomplish something that you are not sure what may or may not happen, that is just fulfilling for me.

and it is just a great thing that you can actually make your dreams come true. you know, we have the playoffs coming up here out on the pga tour starting next week actually in jersey city at liberty national, and those are big events. we play four weeks or five weeks over a five-week stretch so we have great golf coming up. once you win one, you get hungrier to win more tournaments. >> it is well documented that you chew toe back koeshgs and you -- tobacco, and you don't have the image of some of the athletes, and do you feel the pressure to have the regimen that some of the athletes do? >> well, i have a trainer, but most of it is like injury prevention to stay healthy and stay fit and flexible. everybody is individual and do what works best. for me being in the gym and being muscular and fit is not

who i have ever been. but i do the things that i think that i need to do to be successful out there and stay injury-free. >> jason, finally, can you hold up the trophy for us. >> totally. >> how does it feel to know that your name will be engraved on it forever? >> my name is down here in the bottom corner. and you have great names here. sam sneed, ben hogan, ben hogan again, tiger woods, phil mickelson, and walter hagen and gene sarazen. and to know that i will always be a part of the history of the event is unbelievable. >> thank you, jason. >> thank you. >> our pga champion. and the hyperloop is here or at least the vision is. if it is possible, will it be safe? we will explore the angles of the plan. and also, the rise of the

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elon musk unveiling his plans for the hyperloop system, and is there something to this or all hype? phil lebeau joins us from chicago with more. >> good morning, kelly. i loved the "jetson's" music there, and very appropriate for what we are talking about. many people are asking what is behind the hyperloop proposal? well, here are the drawings and

what he believes that it is all about and he is proposing essentially building this between l.a. and san francisco and these would be capsules that flid on air kconditioning up to 800 miles per hour, and carry up to 28 passengers, and as they are going from l.a. to san francisco he says you put a couple of tubes along highway 5 in between and the immediate me one going one direction and one another, and the g-force is comparable to the airplane, but the question is would elon musk build the hyperloop, and he is so far saying no, but he is open to the possibility of building a prototype. >> it is low priority relative to the core mission of space x and tesla, but i think that, i think that it might help if i created a prototype and help get things going. >> the one area that a lot of people are saying that just does

not make sense with this plan is the cost. yesterday, elon musk said you can build the hyperloop between l.a. and san francisco for $6 bi billion, and the skeptics are saying that the cost of building it would likely be much higher, and a few questions to elon musk about that. in the proposal he outlines and says, listen, we have done the math and think that you can do it with amortized over 20er yoors, everybody can pay $20 for a ride and therefore this thing would pay for itself rather quickly. looking at the shares of tesla and the stock has been trading for 145 to 143 and in the general range, but no doubt, kelly, the hyperloop is getting attention as people sit there and saying, okay, interesting, but could it become a prototype to see if it could work. >> and right, phil. we will explore the issue, and we have somebody later on in the program who says he thought it up a couple of decades ago. that is going to be interesting.

and this morning we have the "squawk on the street" question, complete this sentence the only way i would ride the hyperloop is if it would blank. tweet us your answer. >> the boeing 747 travels at 500 miles per hour, and this is going to be 800, and you will travel through a tube. >> i am sensing skepticism. >> and financials overtaking the techs, and nobody is going to build it, and if he does not build it, who is going to build it, and it is only $20. >> okay. we think big. americans. enough, enough. >> everything that you started have been a thought at one time. >> yes. >> and the financials are of taking the stocks right now, but is the sector getting too hot or time to climb on board? we are after a quick american break. [ agent smith ] i've found software that intrigues me. it appears it's an agent of good.

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welcome back. i did want to get to breaking news we have here regarding the plan oft amr and usair to merge, and that is a delicately negotiated deal that took quite some time to bring together. remember that amr has emerged from bankruptcy and now it is going to face a new hurdle that from the u.s. department which is planning to seek a lawsuit or filing a lawsuit to block the deal on the antitrust grounds saying it is anti-competitive and we can tell you that other news outlets have reported the

same, and we can confirm that is the case right now. and i am also hearing the expectation to those opposed to the mernger of amr and usair, they will fight any attempt by the d.o.j. to block the merger, so at this point, we could see the beginnings off what is a contested legal case, but again, there was not a great expectation that would happen, but certainly, our own jim cramer foreexample has talked about it so many times how beneficial it would be for the companies to take out so much potential capacity from the overall industry. so we will see what developing here, and the us airways stock is down on this news again, that there is an expectation that the u.s. department of justice will file a suit to block the deal. >> some parallels in which they sper veened in a big merger with si at&t/t mobile, and their worry was that it would make

prices high foer for the consum and if you are e reducing the capacity, that is going to be done. >> but it is a regional basing, because there are other hubs much more concentrated than the others. so if you want a flight, there are a number of choices to go, but the number of carriers may be significantly diminished. >> yes, it is part of the it is to meet the antitrust of the federal reg yu ulators. and we have the dive back down into this to figure out the focus of the d.o.j. in terms of the opposition. >> this is coming six months after the deal was announced and a february deal. >> yes, it was announced fairly early this year, and usair had been working towards it, and working with the unions and tensely negotiated deal with amr putting up the stiff arm and then working it out, and the synergys going through the merger at a rapid pace, but this

is a stumbling block when the doj comes after you, and not necessarily that it has not been beaten, because they have been beaten before. >> and it is lucky the come at a point when the other people are controlling the capacity very well. if it had been six or seven year, it would not raise the attention because of the ticket prices going up. >> but in the past, opposition to usair and united many years ago. again, with e will see. again, we will see. and when you are consolidating and down a handful of players, that is influencing. >> and now looking at the financial sector in the, so i andith -- with this impressive runup, what should you do? dick, what are you thinking of financials right now? the place to be or not? >> well, you should be buying them aggressively.

i think that what you are beginning to see is that all of the negative ti which is pounding the stocks for three or four years is beginning to lift, because people are realizing that if you get through the negative statements about the industry, the industry is making a staggering amount of money. 2013 is the highest profits ever for the banking industry in the united states. 2012 was the second highest. they have had 15 quarters in a row in which the bank earnings have been up quarter over quarter, but what is impressive is that the earnings power of these companies is stronger now than it was at the beginning of the period. i say that because their capital is, and these companies are massively overcapitalized relative to any period in american history. they have the highest caple the to asset ratio since 1938. they are sitting with more cash and liquid assets and the banks

are putting in 20 cents of every dollar they collect into the fed. they are so liquid that their earnings are negative ly impactd by it. the loan the deposit ratio is down 71%, and you have not seen that ever since they started to come up with the numbers in 1984. the loan/loss ratios are down and the bad loans are down, and the only thing to harm the banks is in the weakness of the economyk and other than that bank stocks arer have very cheap. >> when you hear people talk, they are quiet about the amount of regulation they are facing, but you are not sidetracked about that, dick? >> well, i would be if it meant anything. in other words, if bank earnings had been impacted negatively as a result of all of the regulation, yeah, sure, a fundamental change in the str k structure of the bank earnings which regulation has caused and

therefore the banks are not earning as much money as they have in the past, but it is not happening. the bank are at earnings they have never had been before. if you take the top five companies in the united states in terms of the profit generation, two of them are banks. one is jpmorgan in the three position, and another is wells for forgo, five position. these companies are making more than any other company in the nation. >> yes, that is true, and they are one of the best performing sectors and up in the range of 30 to 35% this the last 12 months, and then last week, a step back. gave it up as one of the worst performing sectors last week, and seeing the further weakness and if that is right, isn't there a place where it is already written in here, and is there a place where it is hairy going forward? >> i don't think so.

when any group of stocks rises this rapidly in price, you should expect some profit taking at some point. at this time, you should be buying the stocks, because essential essentially, if you look at the valuation of bank stocks relative to history, it is not difficult for the bank stock in normal times to sell at the times book ral yovalue, and the rarely any banks selling at 2.5 time, and you have sun trust, and morgan, and citigroup, and others who are selling discounts to book value. no banks to be selling banks at book value six to 12 months from now, and so even though they have run up on prices, they are still not what they were. >> and if i look at bank of america up 85% over the last 12 months and how much further could they travel higher, dick? >> well, both of to stocks will

get 100% higher than they are right now. bank of america will get back the 30/share. that nis not going to happen in the next 12 months or 18 months, but it is going to happen. citigroup, there is an e nor mouse change in the structure of the company and the management and the use of the capital, and et cetera, et cetera, and citigroup could do easily 100% from the current level. these stocks are not coming from the normal levels, but coming from highly depressed levels, and therefore, they are just getting back to the normal levels, but getting back to the normal levels of valuation. >> dick, you made your case clearly. dick bove from rthe banks, than

you for joining us. we are joined by diana olick with growing phenomena. >> there are more than 19,000 known sinkholes in the state of florida according to coralogic adding one right there down the street. they have pulled us from the site where we were this morning and obviously, these stunning pictures of the collapse and the total loss of the building and not great pr for the resort with 53 buildings and 900 units and largely time shares. all but three of the buildings are filled with vacationers. >> we expect insurance people and others to start work. it is too early to say what will happen. we know that this building is a total loss. not likely the build on the site again, but we have other sites available. >> yeah, you heard him right, they are talking about new building in other areas of the resort and this as drill iing

equipment began rolling in this morning and the engineers are now testing the ground surrounding this enormous sinkhole going down two stories. they want to make sure that the buildings around it are safe since some believe that the sinkhole may be the result of the recent heavy rains, and those in the business of fixing sing holes before they are catastrophic like this say they have been busy lately. >> we have been in business for 25 years and we have done 4500 jobs like this and over 100 contractors in the state of florida who do this same type of work. so it is a big industry in florida. >> now, the resort manager says they have more than adequate insurance to cover all of this. as for the insurance claims in florida relating to ink is holes, well, between 2006, and 2010le a loan, $1.4 billion which is according to a florida senate report. one-third of the sinkhole activity tracked since 1960 happened since the year 2000,

and half of it in the last three years, and there is a lot of questions going forward about whether the sing holes are happening now because of the increased development in the area. a lot of new buildings going up in the area. they started in the housing boom, and stalled and now they are going back up again. we will talk about that later on "power lunch." >> on the sinkhole insurance. thank you for the view from florida. parking is about to be r revolutionized. and we will have the ceo of this company to tell us how it is all going to happen very soon where you are next. mine was earned in djibouti, africa. 2004. vietnam in 1972. [ all ] fort benning, georgia in 1999.

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the department of justice to try to challenge a u.s airways and amr's plans to merge. they are seeking to block that merger in court having filed the department of justice having filed in the district court for the district of columbia, and along with a number of attorneys generals for various states citing what you might expect that the deal, itself, is anti-competitive and will end up costing the consumerers a gool more -- a good deal more for air travel throughout the united states saying that the two companies engage in head-to-head co competition and nonstop service on routes worth $2 billion in route-wide revenues, and eliminating the competition would give the merged headline the ability and incentive to raise airfares, and that is one thing that the department says in the complaint. think also say that the vast majority of the airline domestic routes are highly come plaited. this results in four airlines

controlling 80% of the air travel market. a long press relief, and i have not read the full complaint yet, but it has the highlights therein. you have the point of the distressed debt guys in the stock and not so many risk arbiters who would take over the situation. many are calling the anti-trust lawyers to find out where it stands this and the similarity to the modella deal, and is there something that can be f figured out here to meet the satisfaction. >> well, they usually focus on the reagan air force in d.c. with particular being a 9. >> charissa: share, and that immediates to be amended. another thick that is interesting is that they are taking quotes that the us airways executives have made at industry events about how consolidation enables them to raise the prices, which is why you see the smart guy, the ceo of hertz when he trying to take

over dollar thrifty not doing the television or the radio until the deal closes. >> the idea being the last major piece to fully rationalize the industry, but that said, many believe it is healthy overall for the industry, and the u.s., and that those early days here, this deal -- >> and the profits -- >> and take a look at delta shares, because they are down 5%, and what you are esooing is that the industry is responding negatively. >> and if consolidation does occur and the deal manages to come up with and iter ration to pass muster, we will see. we have more early reporting here to try to help guide people in terms of what we can expect. >> all right. the next guest trying to revolutionize the way we park our cars. he wants to automate the system, and eliminate fumes from the car in the garage and on the street. and now, you are a 7-year-old

company? >> yes, formed in 2006 and you had a system that there are so many parking efficiencies to be had if you do it the right way? >> absolutely. we have partnered with a german manufacturing firm, and used highly precise mechanical equipment with high-tech software control systems in order to minimize the space needed for parking. we double versus a similarly sized garage, we will double and sometimes triple the xcapacity f the space. >> and how many of the garages exist? >> three facilities in place since we were formed in 2006 and we were just awarded another facility in downtown brooklyn to be built and the centerpiece of a 2.5 billion revitalization of the marketplace. >> that is a rendering of it right now. >> yes. >> and while people say it is more efficient with the storage space, there is a park on top. >> right. that is the beauty. eliminate the pollution

eliminated with the parking substantially, but the environmental impact of parking and the cars on the road. we are also able to create green spaces and higher density to be developed and built and for cities not only here in new york, but around the country. airports, universities, hospitals, limited land space. >> what happens when it breaks down. >> we have several redundant systems. we have parked over 300,000 cars in our two facilities. we have backup staff and so on. but the 300,000 cars is really the proof in the pudding our systems work reliably and are the better way. >> can you retrofit privately held lots that might have space for 150 cars? >> it's more appropriate for new development. it's become a very -- a product that a lot of new developers are using as land costs go up and as space value increases. the value of our product increases. if you can limit the infrastructure needs of having a parking facility and build more offices, more apartments, more

hospital rooms, more classrooms, just more use of the space -- >> how much more does it cost to put it in. >> we can be a little more expensive than conventional parking. if you're going underground we're actually cheaper in many cases but it comes down to how valuable the land is and how we're able to make the piece of property more usable, more valuable, and service more people. >> auto motion, one to watch. >> thank you for having me. >> still ahead on the program, meet the man who says elon musk stole his idea for the hyperloop. oh, yes. we're back after a quick break. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection.

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welcome back to "squawk on the street." tuesday's edition of "the santelli exchange." you know, yesterday i really enjoyed one of the op-eds. steven moore, the budget sequester is a success in "the wall street journal." the reason i liked it is because he pretty much highlighted how we've gotten here, and there has been a lot of chirping of late. what's chirping? well, i consider it a chicago term. we have the north siders and the cubs, south side and the sox. when the sox do better, you hear

chirping. when the cubs do better, you hear chirping, okay? it's kind of grinding the other side. and there's been a lot of chirping about, hey, the budget deficit is shrinking. i know in the speech before this last one, the president alluded to how it was falling as a function of gdp. and his numbers were correct. and it is something that every politician on both sides of the aisle trying to take some credit for. but yet as much as that's true, remember, george w. bush spent a lot of dough, the president, current president, president barack obama, ramped it up. there was no chirping then. i didn't hear chirping going we're going to hit $16 trillion at midnight, let's party! no. but the effects of less government spending definitely going to slow things down because you're not paying for it but it's a good thing. somebody broke the silence, i think it was bank of america, victoria mcgrain from "wall street journal" wrote a piece on

wall street journal.com and it talks about the agenda for jackson hole. it's august 22nd to 24th. think about what i was saying. wouldn't it be nice if central bankers got together and tried to really figure out how to solve some of the structural issues? but the topics that were put forth, same old thing. the natural rate of interest, financial prices at zero lower bond, the transition of unconventional monetary policy. global liquidity, cross border cap flows. it seems to me that these are the same old topics, the crisis has come and gone. maybe we need to shake things up a little bit like one of those snow globes because i think we need some new ideas. maybe elon musk can figure out a way to put monetary policy in a tube and send it across the country at high speed. back to you, kelly. >> now, that's monetary innovation. thank you very much. it's tweet time. elon musk unveiling plans for his hyperloop. the high speed system would

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we want to draw area attention to the fact that blackberry is spiking again today. yesterday, of course, they said they had consider their options effectively putting the company potentially up for sale or to strike certain alliances. we seem to be building on that price action today. $11.78 despite all the comment over the last 24 hours. if you have just joined us, good morning, here is what you might have missed if you're just tuning in. >> welcome to "squawk on the street." here is what's happened so far. >> bill ackman resigning from the board of jcpenney -- jcpenney board is reaffirming support for ceo mike ullman. >> he said, quote, i elevated a bunch of issues that are critically important by making them public. we came to an agreement. ron will be joining the board in bill ackman's place. >> i know what he needs for the

herbalife short? he needs to join the board. >> exactly. with carl icahn. >> bingo. >> that, by the way, televised live. >> if he called a banker right now and said i want to do a hyperloop, they would throw money at him. >> do you think so? do you really think he could raise money for this thing? >> he could raise it. >> you hear the opening bell this is morning. >> the fed talking about tapering is actually good news for equities. it's good news for the economy because it means we no longer need this life support to keep things going. >> how does it feel to know that your name will be engraved on it forever? >> yeah, you know, that's the great thing. my name is already down here on the bottom corner. >> people are beginning to realize that if you get through all of the negative statements about the industry, the industry is making a staggering amount of money. good tuesday morning.

we're live at post 9 at the new york stock exchange with a check on markets as the dow is falling about 56 points off its session lows. we did see more weakness earlier this morning. but it is the weakest of the major three indexes for the second day as the s&p 500 off about a quarter of 1%, the nasdaq underperforming. yesterday it managed to close in the green. it was the only one of the three. we'll see what happens as we move throughout the session. shares of yum brand slipping this morning as the same-store sales fell 13% in china last month. nearly twice as much as expected. the operator continues to face trouble in china where it's been hurt by bad publicity related to chicken supplier quality. us airways seeing a huge decline in the past hour. started falling on news the department of justice will seek to block the merger between american airlines and u.s. air. we will have plenty more on the story. let's hit it then. this is our road map for the next hour. as it stands at the moment, a good read so far on the consumer this morning. retail sales coming in at

highest levels so far this year. despite that number, one economist says the u.s. economy is still struggling. we'll explain why in a moment. plus, elon musk stole my idea. we talk to a professor who says he came up with the idea for a hyperloop in the 1990s. and college football is worth big money. the university of oregon unveiling a brand new $68 million state of the art football facility. we will take you there live inside. but first, we start with the latest read on the u.s. consumer. retail sales rising 0.2% in july. that was a bit shy of estimates but core purchases showed the biggest gain since december. our next guest says the long term growth potential of the u.s. economy continues to sink. he's michael ferolli joining from jpmorgan. good morning. >> hi, kelly. >> 1.75%, you're saying that's ultimately the best the u.s. economy is going to do?

>> i think on a trend basis that's basically the speed limit of the u.s. economy right now. we have changing demographics which imply less labor supply growth, and it seems like this lower productivity trend we've seen over the past few years is probably going to be with us for a while. so i do think, as i said, the speed limit of the u.s. economy is a bit slower. that doesn't mean we can't grow above trend for the next few years because we have a lot of slack left in the labor markets but i think after we reach full employment, we should be prepared for growth at perhaps below 2% on a trend basis. >> mike, the most interesting thing about this report as well is people might say as a result of that slower long-term growth, that doesn't sound like a great formula, but you're saying, in fact, that's one reason why the fed might exit its purchases sooner than it otherwise would. can you explain that? how is it that an economy which is structurally weaker may see the fed pull back sooner than people would otherwise expect? >> when you have slower trend growth, it means it takes less actual growth to get the

unemployment rate down. we have seen that over the past few years. unemployment rates come down faster than we would have thought given pretty uninspiring growth numbers on gdp. if that continues we could reach full employment faster than most people think which means the fed will have to normalize policy when that happens. >> and what is full employment? we know this will be an issue by the way, that comes up at jackson hole next week. it seems to be an area of debate. estimates ranging from 5% to 7%? >> right. most people on the fomc think it's between 5.2% and 6%. i think it's probably around 5.5%. that still means we have two percentage points of cyclical unemployment which does mean we can grow above trend again for the next few years. but then once we reach trend, i think theoverall growth pace will have to slow some. >> michael, just lay it out for us. behind what you're saying, i mean, what is the analysis. why is the trend growth for this

economy lower? is it because people are in the wrong part of the country? they don't have the skills? they're giving up on employment too easy? they're part of the baby boomers? what's happening behind this kind of code that you're using here? >> right. so part of it is the baby boomers and the slowing of population growth. those combined with slower immigration growth. that's one element of it. the other element is slower productivity. and slower productivity, we have seen that recently, and i think it could persist. one reason for that is we've seen less growth in capital spending on high-tech equipment, and that was a big driver of that 1995 to 2005 sort of once in a lifetime productivity boom we experienced. seemed to really be driven by hi-tech capital spending. that's definitely slowed down in recent years. so i think we probably won't see those type of growth numbers, the productivity numbers, repeat just because we're not getting that same amount of capital. >> are the ceos of this country doing it a disservice? they're so rapidly trying to buy back their own stock.

we were talking about that earlier. they're the biggest buyers of stock around at the moment, ceos on their own company with the company's money rather than actually putting it into the economy, driving jobs, driving growth, driving the potential for this economy to grow far higher. it cuts to the heart of what you're saying. they're not playing their role some might say. >> i think that's a difficult judgment to make. that's one interpretation. another interpretation is we're seeing a slower pace of technological innovation and that just happens from time to time. ceos can be responding to incentives created by different vintages of technology. >> go ahead. >> finish the thought. my apologies. >> i don't think we can necessary ruily rush to that judgment that anyone is to blame for slowing trend growth. >> which is interesting. the lagging r and d is perhaps an area companies can invest

more. but it always doesn't pay off. as we watch the ten-year bond yield moving up 2.7% and that's prompting some of the weakness. >> you didn't really expect the chief u.s. economist for jpmorgan to be critical of ceos in this country, did you? >> i would expect mike to call it exactly like he sees it. is it my turn? >> yeah. >> okay. let's get back to the big news this morning. bill ackman stepping down from the board of jcpenney just days after calling for a new chairman and ceo at the struggling retailer. courtney reagan back at hq with the latest details. >> good morning. yet another twist in the jcpenney board room brawl and this is one few expected. bill ackman of pershing square has resigned from jcpenney's board of directors. jcpenney also announcing the addition of ron tyso in his place. the retailer saying it intends to name another, quote, highly qualified new director in the near future. jcpenney reaffirming its overwhelming support for mike

ullman and chairman thomas engibous. ackman said the board will function more effectively without the noise, noise he created during his two years on the board. not all of it positive certainly, particularly airing his frustration was the slow search for a permanent ceo to replace mike ullman. ackman still has an 18% stake in jcpenney and because he's privy to inside information at this point, he isn't able to exit that position right now. ackman told andrew ross sorkin if he wanted to sell, he could have done so during one of the quarterly windows though with his average purchase price of $25, selling now would result in a rather huge loss. many analysts believe ackman's resignation removes some leadership uncertainty but doesn't so. the issue of poor sales and low traffic in the stores. at the end of the day, the company will live or die based on consumers buying or not buying and that's where investors want the energy focused. ullman has stabilized the

financials keeping the ship afloat. moving it forward is another issue. when jcpenney reports earnings a week from today, how they will reinvigorate shoppers is still the burning question. kelly? >> exactly, courtney. that's the one that still remains unanswered. thank you very much, courtney reagan, with the latest on jcpenney. we turn to another major corporate news story. for more on the doj's move to block the merger between us airways and american airlines, phil bela lebeau joins us now. i'm looking at the doj complaint right now. they believe this merger will result in higher fares, less competition. one quote from the complaint says, the merger of these two important competitors will just make things worse. and then they focus on a couple examples. the one they focus on the most is the d.c. reagan airport which is not surprisingly a big hub for both us airways as well as for american when you look at the east coast in terms of flight service, and according to the doj, the merged airline would have a monopoly of 63% of

the nonstop routes out of reagan national airport as a result. d.c. passengers would likely see higher prices, fewer choices if the merger is allowed. they say these two airlines would thrive independently so there's no need for them to merge. it is interesting to note as well, kelly, when you look at this complaint, the doj is taking the lead, but there are six attorney generals who have joined in filing the suit including the attorney generals from texas and arizona. we're waiting to hear a statement from u.s airways. you see the stock down more than 10%. >> we should mention not just u.s. air, delta and some other airlines are struggling as well. david, any more color you want to add? >> interesting from an investment perspective having spoken to sources who are close to the side that's being sued, there is a belief at this point

that it was described to me as a kitchen sink complaint, meaning this is not a complaint that lends itself to an easy fix. so for those who are hoping perhaps that this would go the route of modelo and constellation brands, that does not appear to be the case at least based on the quick read from those who are looking at the press release on the u.s. air/amr side. their look that this would match delta and united, would create incremental traffic. that's a key to why the deal is being done. that would be beneficial, of course, to many u.s. consumers who are looking for that opportunity, and, therefore, would create additional synergies and revenues that will go to the creditors of amr being many of the unions and the like there. so there's going to be a long fight here it would appear in the early stages at least that we're getting a reaction to and again, as phil said, we'll wait to hear from u.s. air and amr,

but given it's a complaint that does not lend itself to an easy fix, 23that to me spells out a long fight, not a short one. >> would that be your reading as well. you raise the question at reagan airport at d.c. where i think the complaint is it's a 69% market share or it would be if the deal went through. what remedy might they have there? >> it's going to bring it down to 63% from 69%, but to david's point, it's not as simple as saying we're going to peel off "x" number of routes and "x" number of slots. if you read this complaint, it is very clear that the doj is saying, wait a second, there's only going to be four major airlines controlling 80% of the flights in the u.s.? well, you know what, u.s. air ais aa ways and american, sorry you're the last ones to the merger dance party. >> that's not uncommon to have that degree of concentration in an american industry. they will tolerate that. where are we in telecom?

>> in wireless we're at four. the question is can we go four to three. these were four and five, right, phil? >> in terms of right now separately right now if you take them separately, you've got american at number three and then you've got us airways at number five. so you'd be combined three and five to make number one. >> and often times one and two getting or two and three getting together, this gets to antitrust doctrine 101 in a lot of ways. i think what's important for people to realize, and phil echoed this, this does not appear to lend itself to an easy fix. hence, we're going to fight it and fight it for a long time. phil, we'll see what happens if they ever do get to a court case. the doj typically wins all oracle did beat them in people soft. that's a long time ago and a very different industry. >> and at the same time you've got american coming out of bankruptcy. so it will be interesting here and they make a point in here, david, of saying, listen, they

placed the largest airplane order in the history of commercial airplanes, of commercial aviation, when they were in bankruptcy before they even went into this merger. if they're in such bad shape, why are they going to be coming out as a viable, strong company? that's the point of the doj. >> havoc as to who would run two separate companies. phil, we have to leave it there. david, i feel you could be back before the end of the show. >> we shall see. >> david faber and phil lebeau on the doj's move. on this week's edition of "the profit" marcus lemonis tries his best to turn around a struggling popcorn factory. but what advice does he have for the owners of the troubled retailer jcpenney as ackman now leaves the board? we'll ask him in a moment. but first, rick santelli, talking about the muni market, is that right? >> absolutely. and, you know, in order to talk about the muni market, we have to discuss detroit a bit.

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welcome back to "squawk on the street." i'm josh lipton. on this down day, here is one stock well in the green.

that's blackberry. told us yesterday it has now formed a board committee to think about options, including a sale. up big this morning, up 20% in the past two days. some 30% this month. though still down some 90% from its all-time high in june 2008. simon, back to you. >> thank you very much, josh. "the profitt" is back. in an all new episode airing tonight, marcus lemonis tries to pop some profits into a struggling popcorn company. let's take a sneak peek. >> don't make me cry. you're making me look like a liar and i'm not. >> you lied to me. >> i didn't -- when did i lie to you? did you say to me today, are you trying to buy popcorn? did you ask me that? >> how was i supposed to know. you did it behind my back. how am i supposed to trust you. >> marcus -- >> you're asking me to trust you. i'm trustworthy, i have integrity. >> i absolutely do. >> you did not display it. you did not display it.

integrity is the only thing in business. so you can be very wealthy. you can be very smart, but if you don't have your word, you don't have integrity, none of the other stuff is worth a damn thing. right now i do not want to do business with you, because i don't think i can trust you. >> wow. talk about highly charged. marcus, good morning. >> good morning. >> i want to know how it ends but obviously you have to watch tonight. these are getting better and better. >> they're getting better. we wanted to start out with basic businesses and we're building into different business principles. this is about how you control your cash and how you have basic governance over your business. >> know the numbers was the other message coming out clearly. >> in this particular episode, the woman says she makes $350,000 a year except there's a negative balance in the bank account. where is the money? >> and by the way, when you see these back and forth squabbles going on with jcpenney, any thoughts there? is that one of the things where you have to get in and look at

the books yourself or are there obvious things where you can look at it and say obviously this is a place they need to work? >> as a ceo myself, i have to be honest, i'm tired about hearing about all the board discussions. i want to know who is the ceo of the business and more importantly what does the management structure look like under the ceo. who is running merchandising? who is running marketeding? who is running inventory management? the staff and training? we're talking about board seats and i'm sick of hearing it. >> because ackman has put himself in that position and brought in ron johnson. would you say to people like ackman or johnson, this is a retail business. it's specific. you need to know how to sell women's clothing in des moines or montana. that's a skill. you city slickers get out and move to the edge. that's what i hear from my contact in retails. >> what you want to do is get a good ceo and have him or her surround themselves with people who know how to sell in des moines, iowa. but you want to make sure that

you have a team that's clear, it's stable, it's consistent, and that the employees, i don't know how many employees they have, my guess is several thousands, who are they looking to for their leadership? in the absence of leadership they will listen to anybody. >> you know a thing or two about difficult exits. can i ask you about last week's episode? at the very end of the episode if anyone thinks this is all about turn around stories that end with a nice bow -- >> they think it's scripted, they're wrong. >> this florist company you basically helped them turn things around but the guy doesn't want to hear it and ultimately says i don't think your investment, your hundred grand, 150 grand, was any good. take it back. the last scene is you saying i'm filing a lien against your floral shop. so what happened? >> you know, the principle behind the episode was about hand shakes in business and are they gone? like is schiff al ri gone with men? i spent $150,000, fixed the business, at the end of the guy says i don't need you, everything is fixed. i got a call from his mother,

which is kind of ironic because that was the underlying theme. she called me saturday and she sent me a check for $150,000. >> was that the first time you saw your money back though? >> that was the first time and it was amazing because i haven't seen carl since the twitter revolution, but the social media outcry from twitter and facebook and instagram and all these things really is what -- >> in one word, how did you feel about that? >> vindicated. >> thank you very much, marcus. don't miss "the profit" tonight an cnbc at 10:00 eastern and pacific. elon musk stole my idea, so says a former professor from m.i.t. after elon's big reveal of the hyperloop yesterday. hear what he has to say when we come back. [ male announcer ] here at optionsxpress, our clients really seem

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elon musk presented his much-anticipated plan for the hyperloop. he revealed that e started thinking about the concept about

two years ago. what if this idea wasn't entirely new and, in fact, an idea that came forth as soon as the early '90s? ernest frankel is a professor at m.i.t. and the professor joins us this morning. >> good morning. >> what was your first reaction when you heard elon musk talking about something which you say you guys were discussing a couple of decades ago? >> we at m.i.t. are used to people take our inventions and ideas and merchandising them. >> so you think this is a direct appropriation of your idea? >> well, i suppose so. i mean, too many similarities with an evacuated tube and so on and so forth. and this was published several

times as well as by bbc and an interview. it's too close for comfort. including the piping. for example, we estimated that the boston/new york leg would cost $6.8 billion, and low and bow hold, he comes up with the $6.8 billion for los angeles/san francisco. >> even if we were to give him the benefit of the doubt is this idea has been out there. why do you think it didn't gain momentum the first time around and how much of a mistake by policymakers perhaps do you think that was or is this just a fundamentally unworkable idea? >> well it's not an unworkable idea. in fact, i'm talking to some people in china to make it workable here and put some money behind it. but i first advanced it in 1993,

but amtrak wasn't interested and so it never went off the ground. >> and if we don't do it, it sounds like the chinese will. professor frankel, thank you for calling in this morning. sorry we don't have more time to discuss it but i'm sure it's not the last this issue wab on air. we'll get to scott wapner with some breaking news. >> you can add another voice now to the discussion on bill ackman leaving the board of jcpenney. i just got off the phone with allen questrom, he's the former ceo of jcpenney who was linked with ackman in that first letter that mr. ackman had sent to the board. mr. questrom telling me ackman did what was right for the board, what was best for the board. ron tysoe is this new board member in has been named. formerly the vice chairman of fed rated. mr. questrom saying ron tysoe will be good for the board, that the company needs to get the business back on track, also

thinks the company will have to get more equity into the business sooner rather than later. also saying if the board is happy with mike ullman, they should get behind him telling me, and this is significant as well, that he's really not interested in coming back to the board of directors. remember, there was that conversation in ackman's letter how questrom had agreed to return as chairman of the board if he agreed with whoever the new ceo was going to be. questrom saying he's not really interested coming back but he would consider it if he was asked and if only he was asked by the board and he agreed with whoever this new ceo eventually is going to be. but he really stressed the fact that this is not something he was looking to do. that he was asked if he was interested, and he would be, i think it's fair to say, under the right circumstances. guys, i don't know, is david up there with you guys? >> no, he's not. he's making calls upstairs. >> okay. but clearly, you know, not only is questrom focusing in part on

jcpenney's balance sheet in this notion that he thinks the company will have to get more equity into the business sooner rather than later, but also saying that bill ackman did what was best for the board and, you know, giving some support behind this new board member who he does have some experience with. questrom has been in the retail industry a long time. he's worked with tysoe saying he will be good for the board and he's a strong financial executive. perhaps now more than ever that may be what they need. >> sounds like be aman may ackm trying to save face but what do i know. in the meantime elon musk's hyperlook could take you from l.a. to san francisco in 30 minutes at 760 miles an hour. we're asking you the only way i would ride the hyperloop would be blank. tweet us @squawkstreet. right now, 7 years of music is being streamed.

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even the eity in your home. you even get a $1 million service guarantee. that's security no one can bt. [♪...] [click click] [♪...] the european markets are interrupted to bring you this very important message. ♪ happy birthday to you ♪ happy birthday to you >> thank you very much. ♪ happy birthday dear simon >> wow. ♪ happy birthday to you >> is it someone's birthday? >> happy birthday. >> don't you love it.

thank you very much, everybody. that's very kind. >> i think kenny just wants a piece of that scone. am i right or am i right? >> but i'm not being offered it. >> here you are. take it. >> you have to blow out the candles. >> sorry. >> i hope you made a wish. that was very quick. >> i have so many wishes. >> and this is english breakfast tea. >> that's very sweet of you. >> it is simon hobbs' birthday and we have europe european mar trading today. >> the united states is going to be the engine of world growth, but at least europe could be beginning to flat line for some time. we'll wait for that tomorrow. interestingly enough, the survey of german investor and business sentiment was quite strong again today. you have germany pulling higher. arguably the uk as well although it's outside the eurozone. while we have a relatively quiet day in europe, i want to mention the plight of the two big power

companies in germany. rwe and eon. one of them came through with beyond expectation results. look at how we've traded on those two massive, giant utilities in germany. see how they've lost so much of their leverage so far this year. basically wholesale prices are down, wind and solar taking -- getting ahead of them in the queue and trying to get to the distribution networks and they're having to abandon nuclear power as well at a huge cost before 2022 as a result of a political decision. >> all right. let's get a check now on energy and commodities with sharon epperson live in the pits at the nymex. >> hey, kelly. let's start with gold. gold prices are taking a bit of a breather after a four-day winning streak. we're looking at gold down almost $15 below $1,320 an ounce and many traders are looking at the fact gold hit a three-week high in the previous session and perhaps they're saying now it may be time to take some money

off the table. india was hundreds again talked about an import duty on its refined gold bars. that is something else that may be pressuring prices. silver continues to extend gains after rallying nearly 5% in the previous session. so we're continuing to watch the momentum there in silver, momentum as it occurs however on a summer day. and then we're also watching what is happening in the oil markets. a lot of attention to brent crude as we had two key export terminals in libya that were shu shut down. that impacted what we're seeing there perhaps in the libyan oil exports. that's a concern among some traders and perhaps offering some bullish perspective to brent crude prices. also keeping our eye on the supply issues in the north sea and we're looking at the disparity between brent which was trying to make a run for $110 a barrel and what we're seeing right now with u.s. oil price, wti prices. back to you guys. >> all right. great stuff. thanks very much, sharon. let's bring in bob pisani with a look at what's moving, aside

from simon's birthday scone. >> it's mosving very fast. the european equities, 2 1/2 month high. did you see merrill lynch? they put a useful report on fund manager bullishness and bearishness essentially. they're hot on europe. u.s. equities, their highest levels of exposure in two years. eurozone equities, highest since january 2008. that's why they're at multimonth highs and emerging markets, they're still not in. lowest since 2001. bonds, 28-month low. these are exposure levels of the global fund managers. elsewhere, well, take a look at what's going on here. the big play on the plus side today, china etf stories. anything related to china continues to grow on the numbers. look, these are etfs for china, philippines, emerging markets, copper stocks, coal stocks. practically the only movers to the upside. as for the u.s., still depressingly similar.

since the beginning of august, start straight down. this has always been the pattern for the last two weeks. part of the problem, it's very simple. it's the what's going on in the yields here. ten-year yields, that's what's moving here. and retail sales moved the market. it doesn't normally do that. you can see ten-years sitting near the highest levels in over a month. that's a real problem for the stock market. here is what's going on. retail sales do not normally move the market. the first production number for july came out today. that's the retail sales number. the ism numbers are sentiment numbers. the big issue now is not whether they're going to taper, it's how much. guys, the bottom line is we need to see real deterioration in the numbers for the fed not to taper. that's not happening. instead of $85 billion to $65 billion, some traders talking about maybe they'll go down to $55 billion or $50 billion in the taper. that's what's causing a little of this turmoil. now we're debating exactly how much is the taper going to be.

>> as he accepted the taper last week, it will be interesting to see what he says in the wake of that. >> thank you. let's get up to scott cohn with breaking news for us. >> news on what authorities are calling the largest penny stock fraud in history that they've busted in brooklyn, new york. we've been monitoring a news conference by the u.s. attorney. speaking now is april brooks of the fbi. 24 people have been indicted. a nine-count indictment. they say this scheme spread around the world, $140 million in fraud. nine people have been indicted. seven of them are in custody but two of them, including the alleged leader, sandy winick, on the lamb in that i wouiland. they say they literally made up stocks out of whole cloth, a classic pump and dump scene. that was $120 million in fraud. and another $120 million in advanced fees, charging for services that never existed. we're continuing to monitor this news conference and we'll keep

you posted. >> thank you very much. the department of justice is very active today. the other big news we have breaking at this hour is in the airline industry. the united states has filed an antitrust lawsuit to block the merger of amr, american airlines, and us airways. the department of justice conference call is starting just now. let's bring in henry hardvelt, who is a travel industry analyst working with hudson crossing. henry, did you see this coming? did you think the doj might object in this way? >> no, i did not. this is an unprecedented move on the part of doj for airline mergers. >> what do you think is dry driving this? >> we have expressed kerns it might cause thereto to be less competition, higher airfares, i don't agree with their perspective. >> why do not agree? >> i have worked in the airline

business for a long time. it's a brutally competitive business. you report on their earnings and margins all the time, you know this. there is low customer loyalty. our research shows less than 1 in 3 travelers is loyal to an airline. people can and will switch because of price, and there are thousands of fares where you have to make connections where you don't have nonstop service. american/us airways competes against large irairlines. >> that may be true but what they're saying is you now have a high concentration of i think it's 80% of the industry with just four airlines. they're talking about two-thirds, for example, of the d.c. market being with this new airline, and, of course, the big mistake many executives have made at us airways is they have spoken about the ability to raise prices as a result of con sop dation, not the least on the additional fees and charges. to a certain extent they may have hamstrung themselves. >> that's a fair observation.

however, i would also just point out that american and us airways overlap on maybe a dozen or so nonstop routes. there's very little overlap. u.s. air waists is the dominant airline at reagan national. they don't overlook to any degree at major hubs. >> in a word, do you think they will be able to find remedies so the deal can still go through or is this a deal breaker? >> they absolutely will find a way to make this work. >> okay. good to talk to you, sir. thank you very much. a lawyer's view, an attorney's view on that doj news that the deal is being challenged. big money talking in college football. check out these incredible pictures of the new performance center at the university of oregon. wow. >> wow. >> jane wells has more live in eugene, oregon, for us now. jane? >> we're going to talk about it shortly. it's the house that phil built. the university of nike. the duck star. is it enough to help these guys

get over the top and win it all? up next, we speak live with the athletic director at the university of ofeof oregon righr the break. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. f-f-f-f-f-f-f. lac-lac-lac. he's an actor who's known for his voice. but his accident took that away. thankfully, he's got aflac. they're gonna give him cash to help pay his bills

so he can just focus on getting better. we're taking it one day at a time. one day at a time. [ male announcer ] see how the duck's lessons are going at aflac.com see, i knew testosterone could affect sex drive, but not energy or even my mood. that's when i talked with my doctor. he gave me some blood tests... showed it was low t. that's it. it was a number. [ male announcer ] today, men with low t have androgel 1.62% testosterone gel. the #1 prescribed topical testosterone replacement therapy increases testosterone when used daily. women and children should avoid contact with application sites. discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. men with breast cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breast-feeding, should not use androgel. serious side effects include worsening of an enlarged prostate,

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jane wells is there. she's in the center. she joins us live from eugene, oregon, with more. over to you, jane. >> hey, kelly, i'm with the athletic director rob mullens. thank you for joining us. >> thanks for being here. >> i call this the duck star. it's over the top. what do you make of it? >> well, we're so fortunate. we have some recruiting disadvantages in other areas and fortunately the generosity of phil has allowed us to make up in some other areas. >> what's your favorite part? >> there's a couple things i like. one, we're a student/athlete driven organization. so the spaces that support the student athletes is real important. the love the way the designers have captured our past but also put us ahead. >> do you really want to put sweaty young men in italian furniture and woven nepal rugs? >> they treat it very well.

and they know how to take care of it. >> how much does the football program at oregon make? >> we're a $95 million operation overall. football is the economic engine that drives that. so they generate somewhere between 65% and 70% of that $95 million in any given year. >> oregon has gone to the bcs championship once, lost. it's in a bowl pretty much every year. is this enough to take them all the way to the top? how much pressure is there now you have to deliver? you have no excuses. >> there's a lot of elements that go into building a championship organization or team. infrastructure is one of those. so we're very fort yacunate whe it's our academic center or stadium. we have great coaches and student athletes. but that's certainly our goal. >> is the rest of the school, the academic side like, excuse me, i know phil knight has given a lot of money, but hello, why don't we do something to boost up the academic side. football is not everything. >> football is one piece. we're part of a great university. we're just one unit. we're a visible unit.

phil and penny have been very generous. it's the knight library, the knight law school. there's dozens of knight professorships he's endowed. they've been very generous. >> you're dealing with some ncaa recruiting violations right now. nothing compared to what usc and ohio state had to deal with. how hard is it to run such a money making operation where athletes are supposed to be amateurs and should they get sponsorships? >> that's a long-standing debate -- >> it doesn't seem to be working. >> there's a great value in education. if you graduate from the university of oregon with no debt and a degree -- >> if you graduate. >> right. all the experiences you acquire while you're here to prepare you and set you up for life, they graduate with no debt. the other thing is there's a lot of pieces they get. they get tremendous support whether it's medical care, nutrition, academic support. we are very much proponents of a

stipend that goes above the tuition fees, room, book, and board. they think they need a little extra money. that's something on the table at the ncaa. >> rob, thank you so much, athletic director. later on "street signs," we will have the new head coach. watch out johnny football, we may have a heisman contender at this school. >> will you be training yourself, jane, today, while you're there? >> i have already done it. the duck and i had a push-up competition earlier. i won't tell you the results. >> okay. somehow i think the duck won but, jane, see you later. thank you very much. meanwhile, a viable candidate to take blackberry private has reportedly emerged. that's next.

to blackberry now. new reports showing fairfax, the company's largest shareholder, may be interested in taking the company private. seema mody has more on the story. >> now that we know blackberry is evaluating strategic alternatives, the big question is what we will they do? new reports indicate that fairfax may be interested in taking the troubled smartphone maker private. this follows fairfax chairman program wattsa's departure from the board. blackberry's focus on finding a

good alternative isn't stopping it from rolling out a new phone. the blackberry 9720 geared toward its emerging market audience and those unable to trade up to the blackberry 10 operating system. >> wow. thank you very much, seema modys a nasdaq as the shares continue to spike. one of the outperformers today. >> for sure. one more before we hit the brakes. spike lee did not take the conventional route to fund his next film as you will recall. he turned to kick starter with a goal of raising $1.25 million. now, today with eight days left, mr. lee has passed the $1 million mark. of course, spike lee was on "squawk on the street" late last month talking about why he turned to social media to raise the money. >> before there was kick start, there was no internet, you know, social media was meaning writing letters, getting on the phone, and getting the money. so the only thing that's changed

has been the technology. >> so presumably now if he could get there, then it gets made and he'll be able to see what the mystery film was that is around apparently the subject of the lust for blood. maybe why it wasn't made -- >> interesting. that's the point you're making. maybe the topic should be better. >> it's about the lust for blood. >> plenty of people willing to give their money to him. he made the point he's in the past started his career by basically small funded projects that then went on to do quite well. in some ways this is more of a back to the future moment than a futuristic. >> if it makes money, will he return the profits to the people that put the money up. >> i don't know how that works. >> is that how kick starter works? >> elon musk unveiling plans for his highly anticipated hyperloop. the high-speed transportation system would whisk passengers if it's built from l.a. to san francisco in 30 minutes at speeds of over 700 miles an hour. that's 30% faster than a 747.

so we're asking you, the only way i would ride in the hyperloop would be if what? tweet us @squawkstreet. we'll read some of your answers next. out there owning it.

the ones getting involved and staying engaged. they're not afraid to question the path they're on. because the one question they never want to ask is "how did i end up here?" i started schwab for those people. people who want to take ownership of their investments, like they do in every other aspect of their lives.

all right. let's get to it. time to squawk on the tweet. tesla and space x founder elon musk unveiling his plans for the hyperloop. the transportation system that could whisk people from l.a. to san francisco in 30 minutes at speeds of more than 700 miles per hour. the question today is the only way i would ride the hyperloop would be if it blank. and here are your responses. arnold tweets in, they throw in a model s free for the ticket price. rick tweets, the only alternative was a dreamliner with smoking batteries. ouch. and hal tweets, only if they actually built it, a hyperloop. >> $6 billion. that's all apparently it's going to cost. and yet the existing california railway system, the upgrade is $39 billion, $40 billion. >> that's the important point. it's good to think big but it's important to have some roads we can travel on. driving through manhattan it's

brutal, the potholes. >> elon musk will put a plastic tube up here he'll fire capsules through at 700 miles an hour. and a 747 travels at 450, 500. >> talk about concern about the 1%. still, i like the big ideas. >> that is it for "squawk on the street." thank you ever so much for watching. it's noon on the east coast. time for "the halftime report." thanks. welcome to the halftime show. four hours to go until the close. we go to the wall to see where we stand. we're working our way back a bit. the dow is still negative lie 31. s&p and nasdaq in the red as well. golden opportunity. why one chart watcher says right now is the time to short the precious metal. healthy returns. can the best performing sector of the year keep going? we asked the manager of a $300 million health care fund. first, our top st